Allpoint Blog

To Be or Not to Be Cashless
09/14/2016 -
Tom Pierce
It’s not commonplace to see a “No Cash” sign on the door of a small business. But in the trendy, techy neighborhoods of such cities as New York, London or Boston, cashless businesses – such as fast casual restaurants – are emerging.

Some have made the move, because they view it as chic. Others believe it will save them the costs of handling cash – security from internal theft or robbery, bank cash management fees, etc. On the other hand, many businesses continue to accept a variety of payment options as a matter of customer service.

Small businesses, in particular, grasp the reasons for primarily accepting cash or checks. And their ranks are high – roughly 55 percent of the nation’s 27 million small businesses don’t accept credit cards, Intuit data has shown. Another survey of 1,000 small-business owners found that 72 percent prefer cash or checks over credit card payments. And consumers like cash, too. Our 2015 survey of more than 1,000 adults found that 49 percent of consumers have used cash to pay for a purchase at a small business in the last year, with credit following behind at 43 percent.

For many small businesses, especially mom-and-pop shops, simplicity explains why they prefer to stay cash only. Credit card payments can take more time, requiring the customer or clerk to run the card through a machine. And though improvements are said to be coming, the new EMV chip-enabled credit and debit cards take even longer.

Small businesses considering the cashless route need to remember the following benefits of continuing to accept cash:

It avoids expensive credit card-swiping fees that can range from roughly 1.5 percent to 2.5 percent for MasterCard, Visa and Discover cards and 2.5-3.5 percent for American Express, a 20-to-30 cent charge per transaction, a monthly fee to a merchant services provider, and the cost of card readers.

It provides funds immediately and eliminates the business from having to wait at least two business days for payment from the card issuer.

It eliminates chargebacks for a returned purchase or for fraud liability, since some card issuers hold merchants responsible for fraud that occurs through their point-of-sale systems.

It is secure and can’t be hacked, which can prove expensive and erode customer trust. For example, the 2014 data breach against Home Depot cost the company an average of $176 per compromised record, or around $10 billion to be incurred by 2020.

It is dependable, and cannot crash as a chip-and-pin card system did in the United Kingdom on Valentine’s Day in 2015, costing businesses there thousands in lost sales.

It lets businesses serve an estimated eight percent of the U.S. population who are underbanked and without a credit or debit card.

It involves less bookkeeping, which will reduce the business’ cost of a bookkeeper’s time and labor.

In addition, there are actually detriments to not accepting cash. For example, a recent article in from the Boston Globe talked about a cashless business that was breaking a law: it’s illegal in Massachusetts for a merchant not to accept cash.

But a more ubiquitous reason to avoid going cashless has to do with pricing. “Cash helps retailers hold down prices, because the fees they pay credit card companies are typically baked into merchandise prices, making them higher,” the article stated, citing National Retail Federation Vice President J. Craig Shearman. ‘Turning down cash is not something we would recommend,” he was quoted as saying. “The credit card industry has been very successful at brainwashing consumers into thinking plastic is the same as cash. It’s not.”

In short, businesses should consider what payment options meet the needs of their target customers. From there, they must determine whether taking cash only or taking a variety of payment methods will positively or negatively impact their bottom line, cause them to lose prospective customers, or potentially damage their reputation.

For example, many Millennials use a mix of payment options, including mobile payments or debit or credit cards. Alienating a demographic group of this size could be the death knell for a business.

In today’s digital world, as cards remain prevalent and mobile payments become more popular, it can be difficult for businesses to maintain a cash-only posture. Whatever they decide, it’s clear that cash remains an important payment vehicle and should continue to be accepted equally alongside cards and other digital methods.